Some dividend growth investors are only concerned with the size of a stock’s yield.

For these investors, current income is the only thing that matters.  If a stock doesn’t yield a certain amount – say over 3% – then some investors won’t even consider looking at that company.

That’s not to say that high yielding stocks aren’t important in a portfolio, they are, especially for those attempting to live off dividends in retirement.

But investors who are overly concerned with the size of the dividend payment may miss out on great dividend growth opportunities.  There are strong companies that may not have the highest yields, but offer very attractive dividend growth rates.

Some high yielding dividend stocks become that way due steep share price declines.  As you’ll see, many of these companies on this list would have significantly higher yields if their share prices hadn’t seen significant price increases in recent years.

This article examines low yield stocks with yields below 2%, and 5-year dividend growth rate above 10%.

Included in our analysis is our estimated annual return for each stock through 2023. Total return estimate data comes from our proprietary Sure Analysis Research Database.

Low Yield/High Dividend Growth Stock #10: Honeywell International (HON)

• Current Yield: 1.99%
• Most Recent Increase: 12% raise on 9/29/2017
• 5 Year Dividend Growth Rate: 12.4%

Honeywell International’s dividend yield just barely qualifies for this list, but we feel investors should be aware of the company. Honeywell is a diversified industrial company that has four divisions: Aerospace, Home and Building, Performance Materials and Safety and Productivity. The company has more than $40 billion in sales in 2017.

Honeywell reported 1st quarter earnings on April 20th.

Source: Honeywell International’s 1st Quarter Earnings Presentation, page 4

Honeywell earned $1.95 per share, topping expectations by $0.04. and coming in ahead of Q1 2017 by 14%. Revenue was up 9.5% to $10.4 billion, beating estimates by $360 million. The company’s largest division, Aerospace, saw organic sales increase 8% due to high demand for air transport and business aviation products. Aftermarket services, which are a high margin business, had 4% organic sales. The quarter saw organic growth of 5% companywide and based off of the strong performance, Honeywell increased the midpoint of its 2018 EPS guidance by $0.07.

Honeywell has increased its dividend for the past eight years, but has a five-year dividend growth rate of 12.4%. The company gave shareholders a 12% increase at the end of September of last year. Even with the impressive financial performance, shares of Honeywell are down almost 4% this year.  Since the start of 2017, the stock is up almost 29%.

Honeywell’s stock has a current price to earnings multiple of 19, well above the historical P/E of 15.3. Given the company’s high organic growth rates and increased guidance, we fell shares deserve to trade with at least a 16 P/E. If shares were to trade at this multiple by 2023, the P/E would contract 3.4% per year.

With a 7% expected earnings growth rate going forward and a 1.99% yield, we feel that investors can expect a total return of 5.6% per year over the next five years. Honeywell’s businesses are performing well and the market has taken notice.  We feel that this total return doesn’t offer investors enough upside potential at current prices. We recommend waiting for a pullback in shares before purchasing.

Low Yield/High Dividend Growth Stock #9: Nike (NKE )

• Current Yield: 1.1%
• Most Recent Increase: 11.1% on 11/16/2017
• 5 Year Dividend Growth Rate: 13.9%

Nike is the world’s largest athletic footwear, apparel and equipment producer in the world. The company had more than $35 billion in sales last year and holds a 50% market share of the U.S. “athleisure” market. The company also controls almost 20% of the Chinese market. The Nike brand accounts for 95% of total sales with Converse making up the remainder.

The company is a Dividend Achiever – a select group of stocks with 10+ consecutive years of dividend increases. You can download a free spreadsheet of all Dividend Achievers at the link below.

Nike reported third-quarter fiscal 2018 earnings on March 22nd (the company’s fiscal year ends in June). Adjusting for tax reform charges, the company earned $0.68 per share, coming in ahead of estimates by $0.15 and matching the previous year’s quarter. Revenue totaled almost $9 billion, an increase of 6.6% from the previous year and topping estimates by $140 million. North American, Nike’s largest market, saw sales decline 6%.

International markets were a bright spot for Nike. International sales grew double digits, with every geography showing an improvement during the quarter. Europe, Middle East & Africa region grew 9% in Q3. Asia Pacific & Latin America had revenue growth of 11%.

Where Nike really shines and where the company is poised for continued growth is in the Greater China region.

Source: Nike’s 3rd Quarter Press Release

Excluding currency exchange, Greater China grew 19% overall in the quarter. For the first nine months of fiscal 2018, Nike has seen 15% growth in this region. With a market share of ~20% and high growth rates that appear to be improving, the Greater China region can power Nike’s growth over the next several years.

Nike has increased its dividend for the past 16 years. The average raise over the past five years is just under 14% per year. The most recent increase occurred on 11/16/2017 and raised the dividend 11.1%. Shares of Nike are up almost 15% in 2018, following a 20% gain in 2017.

Nike’s forward multiple is 27.1, well above the ten-year average P/E of 20.5. If shares were to trade at their normal P/E by 2023, the multiple would contract 5.4% per year.

Even with an expected growth rate of 11% going forward, the total expected return is just 6.7% year. While the dividend history and growth in China are impressive, we think investors can wait for a better entry point.

Low Yield/High Dividend Growth Stock #8 TJX Companies (TJX)

• Current Yield: 1.73%
• Most Recent Increase: 24.8% on 4/4/2018
• 5 Year Dividend Growth Rate: 22.2%

TJX is the largest off-price apparel and home fashion retailer in the world. TJX has four main divisions: Marmaxx, which operates T.J. Maxx and Marshall stores, HomeGoods, TJX Canada and TJX International.  TJX partners with more than 20,000 vendors around the world who are attempting to clear inventory to make way for new merchandise. TJX is able to buy these products at steep discount, usually 20%-60% below regular prices. The company is then able to turn around and offer these name brands at lower prices to their customers. With a global network of stores, TJX is able to identify what brands a local community prefers and ship products to those locations every week.

TJX has only seen annual same-store sales decline once in the company’s history (1996).

Source: TJX Investor Relations

This time frame covers several recessions. The company’s low price offerings on name brands are very appealing to consumers dealing with the struggles that come with a tough economic climate.

TJX reported earnings for the 1st quarter of fiscal 2019 on 5/22/2018. The company earned $0.96 per share. This was a 17% improvement from Q1 2017, but earnings missed estimates by $0.06. Revenue was up almost 12% year over year and did manage to come in ahead of estimates by $220 million.  Marmaxx, the company’s largest division, increased same-store sales by 4%.  All other divisions also saw sales increases. TJX raised the top and bottom of their EPS guidance for the fiscal year by $0.02.

While stores like Toys “R” Us are filing for bankruptcy, TJX is planning to add new locations.  The company opened a net of 71 stores in the quarter and plans to add at least 200 more during the year.

TJX increased its dividend for the past twenty-two years. The company has increased its dividend by average of more than 20% over the past three, five and ten year periods of time. The most recent raise came in at just under 25%. Few companies can match this record.  Even with these sizeable increases year in and year out, TJX is paying out just about a third of earnings in dividends. This leaves plenty of room for future increases.

Based off of analysts’ earnings estimates of $4.85, shares trade with a P/E multiple of 18.6. The average P/E over the last decade is 16.9, meaning shares could experience a multiple reversion of 1.9% per year through 2023.

Combining this reversion with our estimated earnings growth rate of 7% and the current dividend, we feel shares offer potential yearly returns of 6.8% over the next five years. Trading at its all-time high, we think shares of TJX are a little rich. After an 18% since gain in 2018, we would wait for a pullback in price before buying shares of TJX.

Low Yield/High Dividend Growth Stock #7: Costco Wholesale Corporation (COST)

• Current Yield: 1.16%
• Most Recent Increase: 14% on 4/24/2018
• 5 Year Dividend Growth Rate: 12.9%

Costco operates as a warehouse club company. The company allows consumers to buy everyday items in bulk and at low prices. These low prices generate only about a quarter of Costco’s revenues. The remain three-fourths come from the company’s membership fees. The more members Costco can acquire, the more the company’s earnings can increase. Fortunately for Costco, the number of members has been increasing over the years.

Source: Costco’s 2017 Annual Report

Once people become members, they are likely to remain members as the company has a 90%+ retention rating in the U.S. and Canada. Costco has almost 750 stores worldwide, 611 of which are located in these two countries.

Costco released earnings for the 3rd quarter of fiscal 2018 on May 31st. Earnings per share came in at $1.70, a penny above estimates and a 21% improvement from Q3 2017. Revenue climbed 12.1% high year over year to $31.62 billion. Same-store sales growth was 10.2%, well above analysts’ estimates of 8%. Sales in the U.S, the company’s largest market, grew 9.7% including gas.

Online sales, which is still just a very small part of what Costco does, grew 37%. Online sales account for ~5% of total sales, but the company is starting to roll out two-day dry grocery deliveries and same-day fresh grocery delivery service. These services should be available for all of Costco’s U.S. stores by the end of the year. As more and more consumers turn to shopping online, Costco has an opportunity to increase its e-commerce sales.

One item to keep in mind that is that Costco will be using savings from tax reform to increase its starting hourly wage between $1.00 – $1.50 as well as rewarding current employees with a $0.25 – $.50 raise. While this is an admirable thing to do and helps build loyalty among employees, this will cost the company around $25 million in the fourth quarter. That’s a sizeable amount considering net income was $750 million in the most recent quarter.

Costco has increased its dividend for the last fifteen years. Costco has one of the more consistent dividend increases over the short, medium and long-term with the average raise falling right around 13% over the past three, five and ten year periods of time. The company’s average increase over the past five years is 12.9%. Costco recently raised its dividend 14%. In addition, the company has been known to offer special dividends from time to time, most recently paying a $7 special dividend on May 26th, 2017.

Costco currently trades with a price to earnings multiple of 27.8.  This is well above average P/E over the last ten years of 23.8.  If shares were to revert to the average P/E, shares would experience a multiple contraction of 3.1% per year through 2023.

We expect earnings to grow by a rate of 9.2% per year going forward. Combining earnings growth, dividend yield and multiple reversion, we anticipate that Costco can offer total annual returns of 7.3% per year over the next five years. Costco shares are up 6.5% this year and almost 23% since 2017. We would be buyers on a price decline.

Low Yield/High Dividend Growth Stock #6: Microsoft (MSFT)

• Current Yield: 1.67%
• Most Recent Increase: 7.6% on 9/19/2017
• 5 Year Dividend Growth Rate: 13.9%

Microsoft is a developer of both software and hardware. The company sells products, which includes cloud services, operating systems, business software, software development tools and video games and systems, to businesses and consumers.

Microsoft released 3rd quarter fiscal 2018 earnings results on April 26th.

Source: Microsoft 3rd Quarter Earnings Presentation, page 4

The company earned $0.95 in Q3, which was $0.10 above expectations and 36% above Q3 2017. This was a massive 31% increase from the previous year.  Microsoft’s revenue increased almost 16% to $26.82 billion. This total was $1.05 billion above the average analysts’ target. The company had cash flow of more than $9 billion in the quarter and now has more than $130 billion in cash and equivalents.

Office 365 commercial products continue to be a bright spot for Microsoft. The subscription model that the company utilizes makes revenue somewhat more predictable. Office 365 commercial sales grew 40%. Intelligent Cloud sales was just under $8 billion, a 15% increase on a year over year basis. The company had targeted a $20 billion annual run rate by fiscal 2018, a figure that Microsoft has seemingly accomplished. Azure growth was 89% in constant currency. This was the first time in more than two and a half years that revenue from Azure hadn’t grown at least 90%. Personal Computing sales grew 11% to $9.9 billion thanks in large part to Window commercial products and services. Sales from Gaming products and services improved 16%.

Microsoft has raised its dividend payments to shareholder for the past sixteen years. The average raise over the last five years is just under 14%.  Dividend growth has slowed slightly in recent years, but with the amount of cash the company has on hand shareholders should rest easy that the company will continue to increase its payments well into the future.

In what has been a fairly volatile market to start the year, Microsoft’s stock has managed to improve 15.6% in 2018. The stock is up more than 53% since the first trading day of 2017. The rise in price hasn’t been without consequence. Based off of analysts’ estimates for 2018, shares currently trade with a P/E of 26.4, well above our target multiple of 19.5. If shares were to revert to our target valuation by 2023, shareholders would see a multiple reversion of 5.8% per year.

With earnings per share is expected to accelerate at a rate 12.1% per year, we see total annual returns of 8% over the next five years due to possible multiple contraction. The move in share price has sapped some of the potential total returns over the next five years. Still, we feel that Microsoft is well positioned going forward and should be bought on weakness.

Low Yield/High Dividend Growth Stock #5: MasterCard (MA)

• Current Yield: 0.51%
• Most Recent Increase: 13.64% on 12/4/2017
• 5 Year Dividend Growth Rate: 53%

MasterCard is a global leader in electronic payments. MasterCard has more than 2.4 billion cards in use and partners with more than 25,000 financial institutions worldwide.

The company earned $1.50 per share, almost 50% higher than the previous year. EPS came in $0.26 ahead of expectations and an astounding 48.5% improvement from the previous year. Revenue was also an improvement year over year, as the company generated $3.6 billion or 31% higher than Q1 2017. A tax rate of 17.3%, down from 27% the year before, only added $0.04 to MasterCard’s bottom line. The vast majority of the earnings increase was due to dollar volume growth.

Source: MasterCard 1st Earnings Presentation, page 4.

MasterCard has only increased its dividend for the past seven years, but the average dividend growth over the past five years is 53%. No company can continue that type of pace. The most recent dividend increase resulted in a dividend raise of 13.64%. MasterCard is the lowest yielding stock on this list, but that is because the stock is up more than 72% since the beginning of 2017.

MasterCard has grown earnings at a rate of almost 18% over the past ten years. We think that the company can continue to grow EPS at a rate of at least 15% going forward. The stock has an average price to earnings multiple of 22.3 over the last decade, but currently has a P/E of 31. If shares were to revert to their normal P/E by 2023, investors would see a multiple contractions of 6.4% per year over the next five years.

Including earnings growth, dividend, and multiple reversion, we see shares of MasterCard offering annual returns of 9.1% per year through 2023. Given the gains the stock has seen over the past eighteen or so months, we would recommend waiting for a slight pullback before adding more of MasterCard.

Low Yield/High Dividend Growth Stock #4: Lowe’s Companies (LOW)

• Current Yield: 1.71%
• Most Recent Increase: 17.14% raise on 7/21/2017
• 5 Year Dividend Growth Rate: 20.4%

Lowe’s has more than $70 billion in annual sales, making it the second largest home improvement retailer behind Home Depot (HD).

Lowe’s released 1st quarter earnings on May 23rd.

Source: Lowe’s 1st Quarter Earnings Presentation

EPS came in at $1.19 for the quarter, missing estimates by $0.08, but topping last year’s earnings total by 15.5%. Revenue, while missing estimates by $290 million, was up 3% year over year to $17.4 billion. Same store sales improved 0.6%. While total transactions were down 3.7%, average ticket prices were up 4.3%. Tickets of more than $500 improved almost 4% during Q1  Also working in the company’s favor was online sales, which improved 20% year over year.

Lowe’s, as well as its main competitor, was hurt by a longer cold season in much of the country. This prevented customers from buying lawn and garden materials during the quarter, though Lowe’s did say on the conference call that sales related to the planting season were starting to pick up in recent weeks.

Lowe’s has increased its dividend for the past 55 years, making it a Dividend King. The Dividend Kings are an elite group of stocks with 50+ years of consecutive dividend increases.

The average raise over the past five years is 20.4%. Just as impressive is that the company has increased its dividend by almost the same rate for the last ten years.  There aren’t too many Dividend Kings that can maintain that type of dividend growth over the long haul, but that is just what Lowe’s has managed to do.  The most recent raise increased the dividend by more than 17%

Lowe’s has underperformed Home Depot over the past 18 months, but has still returned almost 33% since the start of last year.  Almost 10% of that return occurred on 5/23/2018 when it was announced an activist investor had taken a sizeable position in the company.

That pop in share price has raised Lowe’s P/E to 17.6, slightly above the historical average of 17. That means shares could see a multiple reversion of 0.7% per year through 2023.  The company is expected to see earnings increase 8.2% per year going forward.

Add in the company’s dividend and shareholders could be looking at a return of 9.2% per year over the next five years. A solid expected return and high dividend growth make Lowe’s an appealing candidate for purchase.

Low Yield/High Dividend Growth Stock #3: Stryker (SYK)

• Current Yield: 1.07%
• Most Recent Increase: 10.6% raise on 12/27/2017
• 5 Year Dividend Growth Rate: 14.9%

Stryker is a global leader in surgical equipment, neurovascular products and orthopedic implants. Due to longer life expectancies, the need for medical devices will continue to grow. It expected that knee and hip replacement market will hit $35 billion by 2022, double current levels.

Stryker, with devices like its Mako robot, is poised to capitalize on this expected growth.   At a time where other medical device companies are seeing declines in joint replacement surgeries, Stryker is growing at a high single-digit clip.

Source: Stryker’s 2017 Annual Meeting of Shareholder presentation

As you can see from the above chart, Stryker’s organic growth is climbing higher while the rest of the med tech industry is struggling to keep up. With this type of performance, shares have seen healthy price increases. The stock is up more than 40% since the beginning of 2017.

Stryker reported first-quarter earnings on April 26th. Adjusted EPS increased to$1.68, a 13.5% increase year over year. Sales improved 9.7% to $3.2 billion. Organic growth improved an impressive 7%. All divisions of the company saw high rates of growth, led by MedSurg which posted an 11.1% increase in revenue. Stryker raised the midpoint of its EPS guidance for the year to $7.22 from $7.12 based off of the strength of Q1.

Stryker has increased its dividend for 25 consecutive years, making the stock a Dividend Aristocrat. The company has raised its dividend nearly 15% per year over the past 5 years.  The most recent raised hiked the dividend 10.6%.

Being conservative, we forecast that Stryker can grow earnings at a rate of 10% over the next five years. Shares trade slightly above the historical P/E of 22.4, meaning investors could see multiple reversion of 1.8% per year through 2023.

Altogether, we feel that the medical device maker offers investors a total return of 9.2% per year over the next five years. Even after shares have increased almost 42% since the beginning of 2017, we feel that Stryker’s financial results, peer outperformance and history of dividend increases make this stock one of the better choices for investors in the medical device sector.

Low Yield/High Dividend Growth Stock #2: The Walt Disney Company (DIS)

• Current Yield: 1.69%
• Most Recent Increase: 7.7% on 11/29/2017
• 5 Year Dividend Growth Rate: 21.1%

The Walt Disney Company is an entertainment and media company. Disney owns the media networks ESPN and the Disney Channel, amusement parks Disneyland, Disneyworld and Shanghai Disney as well as well as movie franchise Marvel Universe and Star Wars.

Disney reported 2nd quarter of fiscal 2018 results on May 8th.

Source: Disney 2nd Quarter Earnings Release 

Disney earned $1.84 per share in the quarter, $0.14 above of estimates and 22.7% ahead of Q2 2017. Revenue grew 9.4% to $14.6 billion. This beat estimates by almost $500 million. Every segment saw sales growth. This includes Media Networks, where declines in ESPN subscriptions had been a drag on results for some time. Studio Entertainment, thanks to excellent results for Black Panther and Avengers: Infinity War, grew 21% year over year.  Disney’s studios now own 9 out of the top 10 spots for biggest domestic box office opening of all time.

Disney, which pays a dividend in January and July, has increased its payment to shareholders for eight consecutive years. The average raise over the past five years is more than 21%. The most recent raise hiked the dividend 7.7%. While 20%+ dividend growth going forward might not be in the cards, a 48% improvement in free cash flow during the quarter could mean that Disney can get back to offering double-digit increases in the future.

Shares of Disney trade with a price to earnings multiple of 15.2, less than the stock’s ten-year average P/E of 16.5. Disney is one of the few companies that trade with a multiple below their ten-year average. This is most likely due to the uncertainty regarding ESPN subscribers.  If shares were to revert to their normal P/E, the multiple would expand 1.7% per year through 2023.

That might not sound like much, but add in an earnings growth rate of 7.1% and the current yield and we think Disney can offer annualized returns of 10.5% for the next five years. Disney’s stock is down 7.5% this year. We feel that the market is giving investors a significant discount on shares of Disney.

Low Yield/High Dividend Growth Stock #1: Visa (V)

• Current Yield: 0.64%
• Most Recent Increase:  7.7% raise on 2/1/2018 and 18.2% on 10/18/2017
• 5 Year Dividend Growth Rate: 22.8%

Visa is the largest credit card company in the world. The company processed more than 29 billion transactions in the first quarter, easily topping MasterCard’s nearly 17 billion transactions.

Source: Visa 2nd Quarter Earnings Report, page 6

Visa reported Q2 earnings on April, 25th. The company earned $1.11 per share, beating estimates by $0.09 and improving 29% from the previous year.  Revenues climbed more than 13% to $5.07 billion, topping analysts’ expectations by $260 million. Visa improved upon almost every metric: payment volume, transactions, international revenues and operating margins were all up at least 10% from Q2 2017. Visa also had $2.6 billion in free cash flow during the quarter, more than enough to cover its dividend payment.

Visa’s dividend streak stands at eleven years, with an average increase of almost 23% per year over the past five years.The company has increased its dividend twice in recent months. Visa, which normally raises it dividend for the December payment, increased its dividend 18.2%. The company then followed that up by raising its dividend for the March payment, this time by 7.7%.  While Visa haven’t seen quite the gains MasterCard has seen, shares have followed up 2017’s 46% price appreciation with a 14.65% gain in 2018.

We expect shares of Visa to grow at 15% per year going forward, slightly below the ten-year average growth rate of 16.3%. The stock has traded with an average P/E of 23.1 over the past ten years. Based on the stock’s current multiple, shareholders could see the P/E contract 4.8% per year through 2023.

We see shares offering a total return of 11% per year through the next five years. Due to the company’s business fundamentals, better overall total return expectation and stock underperformance relative to MasterCard, we feel Visa is a better buy today of the two credit card companies.